Disney, iTunes Partnership Off to Rousing Start

Disney's partnership with Apple's iTunes Music Store is off to a strong start, with 125,000 movies downloaded in the first week, according to Disney CEO Robert Iger.

The fast start has prompted Disney to project possible revenue of up to US$50 million during the first year of its partnership with the music and movies download site.

Delivering the Goods

Disney generated $1 million in sales of films during the first full week that its catalog of movies was available through iTunes, Iger said at an investment conference sponsored by Goldman Sachs in New York City.

"Clearly customers are saying to us they want content in multiple ways," Iger said. "We are very, very bullish on consumption of electronically delivered media."

Earlier this month, Disney became the first movie studio to offer downloads of full-length feature films on the music store, offering up 75 titles from the Walt Disney, Pixar, Miramax and Touchstone Pictures catalogs, selling for between $9.99 and $14.99 each. Other studios have since joined in, helping to push Disney to the forefront of the Internet-based video-on-demand marketplace, at least for now.

Additional partnerships between Disney and Apple have been the subject of significant speculation in recent months, after Apple CEO Steve Jobs joined the board of directors at Disney. For now, the hook-up is limited to the movie and TV show downloads -- Disney owns ABC, whose primetime shows such as "Desperate Housewives" were among the first commercial video available through iTunes.

Only the Beginning?

That could change, however, with Iger touting both Jobs' involvement on his company's board of directors and Apple's ability to innovate in the digital entertainment space. Iger cited the recently previewed iTV device, which Apple plans to use to let consumers show video downloaded and stored on their PCs on their television sets.

Iger said iTV "felt like a game-changer to me in many respects." Though Jobs showed off a prototype of the product at a recent event, the iTV won't be commercially available until early next year.

The CEO also lauded Jobs as a "tremendous sounding board" on how Disney should approach the changing digital landscape.

Jobs' links with Disney may have helped him convince the studio to make its movies available on iTunes at a discounted price, something other studios were said to be reluctant to do -- at least until Disney took the plunge -- for fear of cannibalizing DVD sales.

Prior to adding movies to the mix, Jobs said Apple was selling around 1 million video downloads each week, many of them popular TV shows from major networks.

Glimpse of the Future

For Disney, $50 million is not a significant amount of money. Its most popular movie released so far this year, "Pirates of the Caribbean: Dead Man's Chest," recently passed the $1 billion mark in worldwide revenue.

Still, the partnership with Apple may be a fast track to a robust digital delivery system for Disney, and its endorsement of the iTunes option has helped spur others to follow suit. Disney is notoriously guarded of its intellectual property. The fact that it trusted the digital rights management tools Apple uses may give others a higher degree of confidence in Internet-based content delivery.

Iger said Disney is still focused on developing its own digital distribution channels, using its existing Web properties to deliver content rather than relying on third-party partners in every case.

It's clear the Disney-Apple partnership is off to a strong start, said Inside Digital Media analyst Phil Leigh. Apple has already signaled the future is just around the corner by pre-announcing the iTV device, Leigh added, suggesting 2007 will be an important year for Web-based content delivery.

"Disney has partnered with Apple and together they've taken a leadership position," Leigh proclaimed.

Apple is using its iPod dominance and the success of the iTunes Music Store to become an early leader in the digital video download space, JupiterResearch analyst Michael Gartenberg said. Having desirable content is a key piece of that strategy, he added.

"Apple is having greater success than other players have had trying this same approach," Gartenberg told MacNewsWorld. "When you're talking about PC-based video downloads, you need to tell a complete story for mobility as well as getting content to TVs in the home. At the moment, it's hard for competitors to tell that complete story because they don't have the iPod."